RSI: 2Q railcar orders, deliveries flex muscle

The Railway Supply Institute on Friday, July 18, 2014, released its railcar industry order, delivery, and backlog statistics for the second quarter, with the data showing strong growth, which one analyst attributes largely to ongoing crude-by-rail (CBR) developments.

Orders totaling 33,912 cars were the highest since the first quarter of 2011. Deliveries of 16,056 were the highest since the third quarter of 2008. The second-quarter backlog totalted 99,78 cars.

Industry orders for tank cars totaled 10,628 in the quarter, more than double the first quarter's total of 4,769 tank cars, reflecting a burst in demand for new tank cars able to meet the demand, the regulations, and concerns related to CBR shipments.

Overall industry orders "exceeded tank orders for the fifth consecutive quarter, suggesting a continued trend toward a more "normal" concentration of industry orders," KeyBanc Capital Markets Inc. analyst Steve Barger wrote in a note to clients Friday. Freight car covered hoppers, for example, notched the largest concentration of orders, 17,225, or 51% of the total orders, though below the 61% mark of the first quarter of 2014.

"Together, tank and covered hoppers accounted for 82% of the total orders in the quarter vs. 81% last quarter. Industry book-to-bill came in at 2.1x, making it the strongest figure since 3Q10," Barger said.

"We think these data support our view that shale plays continue to be the dominant factor in order trends, with tank cars and frac sand cars accounting for about 65% of the quarterly orders," Barger observed. "Additionally, we expect that tank orders in coming quarters could remain strong, as the initial drafts of regulatory design changes are published later this year."